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By Tom Cushing

Overtime Overhaul: Toward Fair Labor Standards

Uploaded: Mar 26, 2014

Americans generally look 'up' more than they do 'sideways,' focusing on the heavens in preference to the landscape. We have always considered ourselves more Tomorrow's Success Stories than today's working class heroes. The primary time we look to the horizon is to see whether our ship's coming in.

Thus it was that unions had to fight a several-front war in their campaigns to organize American workers and improve their daily conditions. Management goons and Pinkerton militias, and the legal system's stacked-deck, were bad enough  organizers also had to contend with workers' focus on vertical mobility over side-by-side brotherhood.

That situation evolved over many years of struggle, and changed dramatically in the 1930s. With the Great Depression leaving business influence at a low ebb, FDR's New Deal legislation included the National Labor Relations Act that guaranteed workers' rights to organize, and the lesser known Fair Labor Standards Act (the FLSA). The latter law ensured certain minimum decencies for workers, whether or not they were unionized. Included among the FLSA's protections were the nation's first national minimum wage (two-bits, at the time), overtime pay and child labor limitations.

The overtime pay provision sets a national standard by requiring time-and-a-half to be paid for covered workers' hours in excess of forty in a running seven-day cycle. States are allowed to create their own rules on the subject, but only if they are more protective of workers than the federal standard  thus California uses a system based on 8 hours in a 24-hour cycle, then time-and-a-half, with double-time after 12 hours.

These are general rules; exceptions and exemptions are several, and require that attention be paid to Department of Labor (DOL) regulations that enable the law to be applied to specific circumstances, and updated without requiring an Act of Congress (a term that once was not an oxymoron).

The FLSA itself calls for exemptions for Executive, Administrative and Professional workers, but leaves it to the DOL regs to define exactly what those terms mean in practice. Those regs were last updated a decade ago, and significantly simplified the exemption criteria. In each of those cases (there are other, less popular exemptions), to be exempt from overtime, the regs called for a job to pay at least $455/week in regular salary, and included other specific requirements. If we graciously assume a 40-hour week, that would come to $11.38 per hour, or about $23,000 per full-time working year. (That's 'graciously' as in 'good gracious, does anybody really work only 40-hours/week?')

That's a pretty low wage at which to be giving-up time-and-a-half. Hours over forty per week drive down that wage, and today, it buys only about 80% of what it did in 2004 (for some reason, politicians refuse to index this stuff to maintain its purchasing power). Even the Poverty Guideline for a family of four in this country is $23,850. For comparison, the median family income in this valley is over $150,000. Six times higher.

So, in keeping with his promise to act unilaterally when he can, the Prez has directed the Department of Labor to develop new regs governing those exemptions. They are supposed to further simplify the definitions for easier application by employers, and more importantly, augment the protections afforded and intended by the FLSA  whose operative title word, after all, is "Fair."

The new regs will go through the typical approval process of publication and opportunity for comment. As always, Congress can overturn them by statute, but would have to overcome a likely veto. If past is prologue, the new rules will take effect sometime next year.

What will they be? Conjecture abounds  our own state rules kick-in the exemption at $640/week, going to $800 in 2016. Some presumed experts are thinking that $1000/week is a good round number. If the exemption moved to that point, it is said that would make eligible for overtime some 10 million new workers. That's a dramatic increase, but still far fewer in total than were covered by the law's protection in 1975.
Any redefinitions of the other criteria will also exert an influence.

None of the predictions I have seen to-date, however, have taken account of the dual purpose of the overtime law. Sure, it was intended to reward hard work, but it was also passed at a time when unemployment remained stubbornly high  far worse than the current unacceptable rate. Businesses will be significantly less impacted if they hire more workers to cover those 40-hour increments, and rely less on OT (granted, they will be actually paying for work that's now done free for them). That has the effect of bringing down unemployment, which is also a good thing.

Finally, lest anyone think the sky is falling (it's rain, actually, but I understand the confusion), context is important. Since the middle of the last century, American workers' productivity has grown more than two-times faster than their wages. That gap has accelerated in the past decade. 'Normally,' labor and capital would share in the bounty thus created, but real wages have gone up hardly-at-all since the 1980s  the entire benefit has gone to capital  to companies' bottom lines.

With bargaining power thus tilted, and with such measurable inequity in the results, I have no problem with government stepping in and commanding better minimum decencies. Corporate profits, which have grown more than 11 times the rate of wage increases in this recovery since 2007, will adjust, slightly, as will the markets. If the Dow 'corrects' as a result, then that's an actual correction.